TORONTO - Canadian debt loads grew at their fastest pace in two years during the summer, according to a report released Wednesday — an alarming rate given that officials continue to warn consumers that household spending is out of control.

Credit reporting agency TransUnion's latest quarterly analysis of Canadian credit trends found average consumer non-mortgage debt jumped 4.6 per cent year-over-year in the third quarter to an average of $26,768.

Measured on a quarterly basis, debt grew 2.1 per cent in the summer from the second quarter of this year.

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Which Parts Of Canada Have The Highest Household Debt?

Which Parts Of Canada Have The Highest Household Debt?

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"It's almost been two years and it's the largest year-over-year increase we've had and I think it's the largest quarterly increase we've had during that time period as well," said Thomas Higgins, TransUnion's vice-president of analytics and decision services.

Higgins said the increase stands in stark contrast to encouraging signs from relatively stagnant debt growth in the prior three quarters.

He also points out that in the past five years, debt loads have increased 400 per cent more than the rate of inflation — with inflation as measured by the Consumer Price Index up nine per cent and consumer debt jumping more than 37 per cent.

"Debt's outpacing us and continues to outpace us, so at some point in time there's going to be a reconciliation," Higgins said.

"Hopefully it's not drastic and hopefully it doesn't hit everybody, but there's going to be a correction somehow along the way."

A 11 per cent uptick year-over-year in auto loans to an average of $19,228 was the main driver of the growth in overall debt as consumers are once again shopping for cars, a big ticket purchase largely put aside during the doldrums of the recession.

"During the recession people held off on buying the new car, they refinanced the lease or continued with what they had longer than they would have," Higgins noted.

Canadian instalment loan borrower debt grew 2.3 per cent over the third-quarter of last year to an average of $22,849.

Higgins said he believes the reason consumers continues to ramp up their debt loads — aside from the protracted period of record low interest rates — is that scary economic headlines from around the world have started to dissipate, with less bad news coming out of Europe, the U.S. posting growth and Canada reporting a healthy jobs market.

Still, there were some glimmers of positivity in the report. Canadian average credit card debt — which carries the highest carrying costs — was down one per cent year-over-year, though it was up half a per cent from the previous quarter and now hovers at an average of $3,573.

Borrowing on lines of credit fell 0.2 per cent year-over year, but grew nearly one per cent since the second quarter of the year and sits at an average of $34,050.

Perhaps the most encouraging news in the report was that delinquency levels — those who are late or default on a loan— continue to remain low across all categories.

In fact, last week TransUnion's competitor, Equifax Canada, reported that the number of Canadians missing or defaulting on loan payments fell to pre-recession levels during the summer even though the amount of money owed continued to rise.

Equifax found that overall non-mortgage debt loads during the third quarter were up 1.8 per cent from the same quarter of last year. However, only 1.22 per cent of debts were unpaid after 90 days or more in the July-September quarter.

That's down sharply from 1.37 per cent in the previous quarter and the lowest delinquency rate on record going back to early 2007, before the recession began.

Canadians have heard repeated warnings from both Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty about the perils of taking on too much debt.

A report earlier this year by Moody's Analytics said with Canadians so deep in debt, it would be extremely difficult for domestic spending to pick up slack in the economy if things started to go downhill.

That could result in a serious downward spiral in employment levels, household spending and the quantity and quality of credit outstanding, it said.

Higgins expressed some fear that borrowing could be even higher in the final quarter of this year — which includes the holiday shopping period.

"We're moving into the Christmas season so I anticipate we might see another high increase year-over-year when we get to the Q4 numbers when we get some Christmas spending in there."